The Commonwealth of Australia v Ling, N

[1993] FCA 933

9 4 3 9 3

JUDGMENT NO. .a . . .a . .mmn.amaa.

IN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DIST RICT REGISTRY ) No. NG 182 of 1992

1

BNERAL DIVISION )

BETWEEN :	THE COMMONWEALTH 0	P
AUSTRALIA

Applicant

AND :	NOEL LING & ANOR Respondents
REASONS FOR JUDGMEN	RECEIVFT)

1 6 DEC 1993 -

ZEDFRAl P-* '-

Three motions are before the Court in which the primary question is whether the sum of $850,000 and accrued interest held by the of £ice of the Public Trustee of Queensland should continue to be held after entry of judgment in this proceeding, matter number G 182 of 1992, and certain other proceedings, in aid of execution, or released to the first respondent, Noel Ling. The question arises in the course of complex and lengthy litigation between the parties to this proceeding and other proceedings. I shall briefly state the primary facts and the background of the matter.

China paid fees to Mr Ling, who was to provide educational	services in connection with a course of study offered by him.
It was alleged that the fees were paid pursuant to agreements made in consideration of a promise by Mr Ling to provide courses of study for the students in Australia. It is claimed that it was a term of the agreements that Mr Ling would refund those fees if a student was unable to obtain a visa to enter Australia.
The students were unable, for legitimate reasons, to obtain visas and were unable to attend the courses and it is, therefore, claimed that the students were entitled to refunds. The students irrevocably assigned to the Commonwealth all of their rights in respect of the fees paid; and in consideration of the assignments the Commonwealth refunded the fees to the students. The Commonwealth gave notice to Mr Ling of the assignments and demanded payment from him accordingly. It seems that the amount of money involved was in the order of some $8,000,000.
The Commonwealth's claim in the proceeding is put on a number of different bases, principally, breach of contract and misleading conduct by Mr Ling under Part V of the Trade Practices
1974. The Commonwealth seeks relief, including damages under ss. 82 or 87 of the Trade Practices Act, and damages for breach of contract. The case was heard by a Judge of this Court (Beaumont J), who gave reasons for judgment on 3 September 1993.
His Honour held that the Commonwealth had established the existence of agreements between the students and Mr Ling and that fees and expenses were paid by them to Mr Ling as alleged by the Commonwealth; that it was an implied term of the agreements that the fees and expenses would be refunded if the students could not obtain visas; that visas could not be obtained, so the fees and expenses were refundable; that, in consideration of the reimbursement to the students of these amounts by the Comnrlwealth, the students had validly assigned to the Commonwealth their rights to the refund; and that the Commonwealth gave Mr Ling a valid notice of the assignments.
His Honour said that he proposed to order that Mr Ling pay the Commonwealth an amount to be calculated in accordance with his Honoures reasons. He adjourned the matter so that the Commonwealth could bring in short minutes of order in accordance with his Honour's reasons. His Honour also said that he would hear submissions on the question of the Commonwealth's claim for interest, costs and any other outstanding matters. His Honour later ruled that judgment be entered for the Commonwealth against
Mr Ling in the sum of $7,990,535.86, that the application be
dismissed as against the second respondent; and he made an order for costs in favour of the Commonwealth against Mr Ling.
He directed that the orders not be taken out before 8 September 1993 and that the entry of judgment in the sum of almost $8,000,000 be stayed until further order, pending the outcome of Kr Ling's prospective appeal to a Full Court of this Court, on the condition that he prosecute the appeal expeditiously. I have been informed by counsel that the order
made by his Honour that the orders not be taken out before 8 September was subsequently extended. The orders have not yet been taken out.
It is not necessary for me to say much more about the history of the litigation, except in so far as it relates directly to the sum of $850,000 previously mentioned.
On 5 March 1992 a Judge of the Supreme Court of Queensland heard a proceeding brought by the Director of Prosecutions in the State of Queensland under the provisions of the Crimes jconfiscation of Profits) Act 1989 (Qld). The Supreme Court ordered by consent, but without admissions, that a certain fund, being an amount of $850,000, be held by the Public Trustee until certain unregistered leases over property in Queensland were placed in registrable form and registered, whereupon the Public Trustee was authorised to pay the whole of the fund to Mr Ling.
In the present proceeding another judge of the Court (Davies J) made orders on an interlocutory footing on 23 April 1992, by consent and without admissions. Those orders included a mareva injunction which restrained the respondents until the final hearing of the proceeding from: removing, or causing or permitting to be removed, from Australia any of their assets therein; or selling, charging or in any way dealing with, or causing or permitting any of those things to be done to any of their assets, wherever situated.
There was a proviso imposed on the operation of the order, to the effect that the order was not to prevents (a) Wr Ling paying ordinary living and business expenses; (b) the second respondent carrying on the ordinary course of its business; and, (c) the respondents paying reasonable legal expenses as incurred in this proceeding.
An order number 2 was made by his Honour that Mr Ling, forthwith upon being notified of that order, direct the office of the Public Trustee in Queensland to hold, subject to any further order of the Supreme Court in Queensland, the sum of $850,000, which was the subject of the earlier order of the Supreme Court of Queensland, and to deal with that sum only in accordance with either any further order of this Court, or a written direction signed by both the Commonwealth and Mr Ling, or their respective solicitors.
On 2 February 1993, another Judge of this Court (Beaumont Davies J, relating to the $850,000. His Honour appears to have J) in the present proceeding was asked to vary the order of
approached the case on the footing that the order of Davies J. of 23 April 1992, relating to the $850,000, was intended to operate as a form of mareva injunction.
The Commonwealth, however, indicated to his Honour that it wished to support the injunction on a broader footing, because it then sought to raise as a cause of action that it was entitled
to trace as a matter of proprietary right a claim to the fund of $850,000 itself. Such a claim did not appear on the face of the pleadings as they then stood before his Honour. The Commonwealth indicated that it proposed to seek leave to amend the pleadings to enable it to make this allegation.
I am not entirely sure of what the fate of that allegation was, but it certainly is not pressed so far as the present motions before the Court are concerned.

In this proceeding, G 182 of 1992, the Commonwealth of Australia seeks damages and other relief against Mr Ling and Australian TEFL College Pty Limited, the second respondent, a company controlled by Mr Ling. The Commonwealth claims that between 1987 and 1990 students from the People's Republic of

The three motions before the court today are as follows:

(a) A motion by the Commonwealth for an order expressed in

the usual form of a mareva injunction against Mr Ling, in short, that he be restrained from removing or causing removal of any of his assets from Australia, or doing anything with any of those assets except the payment of ordinary living and business expenses of himself, or his reasonable legal expenses as incurred

his satisfying any judgment in this proceeding, or in this proceeding, or in any appeal therefrom, or in

certain other proceedings which are specified in the
motion.

The second order sought by the Commonwealth is that Mr Ling direct the Public Trustee of Queensland to continue to hold the sum of $850,000 and any interest which has accrued on, or will accrue thereon, to deal with that money only in accordance with a further order of this Court, or written directions signed by both the Commonwealth and Mr Ling, or their respective solicitors, and that the order should continue in force after entry of judgment in aid of execution.

(b)	a motion by Mr Ling, seeking the vacation of order number 2 made on 23 April 1992, that is, the order relating to the $850,000.
(c)	a motion by the receivers and managers of Palm Springs Village Pty Limited (Palm Springs) seeking in essence the same orders as Mr Ling seeks in his notice of motion. Mr Ling asserts, as I understand it, that some years ago he lent to a trust known as the Carmichael Trust, a substantial sum of money (approximately $4,000,000 though the precise figure is not really clear on the evidence before me) and gave
that money to the trust in April and June of 1990.

A portion of that money appears to have been lent, so Mr Ling says, by him as trustee of the Carmichael Trust to Palm Springs. Doing the best I can on the material before me, it seems that a Mr Griffiths and his wife were in control of Palm Springs before receivers and managers were appointed, and the orders of the Supreme Court of Queensland made on 5 March 1992 to which I have already referred required Mr Griffiths to do whatever was necessary to ensure that the Public Trustee of Queensland retained the sum of $850,000 previously mentioned, which, it seems, represents what had been at some stage the loan made to Palm Springs by Mr Ling.

Orders sought by the Commonwealth in its motion are in effect designed to ensure that the $850,000 and any interest which has accrued or will accrue thereon remains under the control of the Public Trustee of Queensland until judgment has been entered in this proceeding (and other proceedings to which reference has been made) in aid of execution. The making of this order is opposed by Mr Ling and by the receivers of Palm Springs. Counsel for Mr Ling submitted that the $850,000 and interest thereon cannot constitute property that is liable to be seized in execution if Mr Ling remains liable for a judgment debt to the Commonwealth in this case. Counsel submitted that the fund in the hands of the Queensland Public Trustee is the property of M r Ling only in the sense that he is a bare trustee of it on behalf

of the Carmichael Trust.

It was argued that Mr Ling has no beneficial interest in the money held by the Public Trustee because of the operation of clause 11 of the relevant trust deed for the Carmichael Trust. Hence, so it is said, Mr Ling can never obtain any beneficial interest at all to the $850,000 so it cannot be seen as an execution of any judgment debt which may remain after the appeal

against Beaumont J's order has been determined.

Whether the claim in relation to the $850,000 that is now made by the Commonwealth is properly characterised as a claim for a mareva injunction or as a condition of a stay of execution of the judgment of Beaumont J, is perhaps open to some argument, but no party made an issue of this point before me. As the orders of Davies J and Beaumont J to which I have referred have proceeded on the basis that the proper foundation for the order in relation to the $850,000 sought by the Commonwealth is a mareva injunction, I shall proceed on the same basis, although in the end I do not think it matters.

It is well established that mareva injunctions may continue in force after judgment in aid of execution: see Dewutv Commissioner of Taxation v Winter (1988) 92 FLR 327, per Yeldham J, and the cases there cited by his Honour.

M1: Ling's case is that a deed of trust for the Carmichael trust of 25 August 1989 of which he is the trustee and one of the beneficiaries (the other beneficiaries being his children) contains clause 11, which provides so far as relevant, as

follows : 

"Notwithstanding anything to the contrary hereinbefore expressed or implied:- (a) no discretion or power by this deed conferred on the Trustees, or any other person shall be exercised and no provision of this deed shall operate so as to confer or be capable of conferring any benefit or interest on the settlor or any other person (notwithstanding that he be otherwise within the description

of the beneficiaries) who has paid money or

transferred property otherwise than for a full consideration in money or moneys worth to the Trustees to be held on the trusts created by this deed ..."

Counsel for MS Ling relied upon two letters dated 2 April 1990 and 30 June 1990 which purport to be written by MI Ling to the trustee of the Cannichael Trust (that is himself) in which he states that he wishes to make a gift of certain sums of money which total $4,168,000 to the Carmichael Trust and that the gift should be recorded by debiting that sum against funds standing to his credit in the financial records of the trust and recorded as a loan. The documents state that Mr Ling acknowledges that the gift is an irrevocable gift, is made to the donee absolutely and that no claim is to be made by him for the repayment of any part of the money.

There is a further letter in evidence tendered by counsel for the Commonwealth dated 30 June 1990 to similar effect, but
in relation to the total sum of $4,168,000.	Mr Ling did not give
evidence in the proceeding before me.	The two letters to which

I have referred relating to the alleged gift of 2 April and 30

June 1990 are annexures to the affidavit of Mr Ling's solicitor who refers to the documents simply as true copies of "deeds of gift to the Cannichael Trust".

I allowed the affidavit of the solicitor to be read as if the deponent was asserting that, based on his information and belief furnished to him by Mr Ling, those two letters were deeds of gift because they were the instructions of the solicitor. There is, however, no evidence from Mr Ling himself about the matter at all. Ling says, therefore, that as he has made the g i i ~ of some $4,000,000 to the Carmichael Trust, ~epresenting the loan# which he had previously made to the trust, clause 11 of the deed operates to preclude him from ever being a beneficiary under the trust because he paid money or transferred property to the trust otherwise than for full consideration in money or moneys worth to the trustee.

There is other evidence, however, before the Court pointing

in a contrary direction. In an affidavit of Mr Ling sworn on

25 November 1992 in this proceeding, but not for the purposes of

the present motion, M r Ling deposes to the following:

"The o n l y s u b s t a n t i a l amount o f cash

a v a i l a b l e t o me w i t h which to pay m y l e g a l

and	b u s i n e s s expenses i s t h e $850,000	made
t h e s u b j e c t	o f t h e Mareva	i n j u n c t i o n granted

by t h i s Honourable Court on 23 Apr i l 1992

and any interest which has accrued on t h a t sum. Unless and u n t i l part o f t h e above $850,000 i s r e l e a s e d , I am unable t o pay t h e fees demanded by my former solicitors to o b t a i n t h e r e l e a s e o f my f i l e s and I w i l l be

unable	t o pay my present	s o l i c i t o r s a s and
when	t h e i r accounts f a l l	due."

During the hearing before Beaumont J in February this year of the other motion to which I have referred (being the motion by Mt Ling for a variation of orders previously made including the order of Davies J of 23 April 1992 relating to the $850,000) the solicitor appearing for Mr Ling plainly conducted the matter on the basis that the $850,000 was, on his instructions, an asset of Mt Ling's.

Mr Ling did not give evidence in that proceeding. I note

that the evidence of Mr Ling and the statements by his solicitor before Beaumont J were well after the execution of the Cannichael Deed of Trust, and after the alleged making of the gifts by Nr Ling to the trust.

I am not satisfied that M r Ling has ceased to be a beneficiary under the Carmichael Trust, assuming the trust is valid. If he had given sworn evidence, I would have been able to assess its credibility in the light of sworn evidence which he gave in this proceeding, though for a different purpose, last year.

The evidence before me suggests that the better conclusion is that Mr Ling is the beneficiary of the $850,000 presently held by the Public Trustee of Queensland; but I make that provisional finding solely for the purpose of the interlocutorymotions that are presently before me. Whether in fact and in law Mr Ling is the beneficiary of this, or any other sum, or has ceased to be so by reason of the operation of clause 11 of the trust deed, is not a matter which I need determine on any final basis, as the essential nature of mareva injunction applications is interlocutory, and in this present case is in aid of preserving assets pending execution of judgment debts.

It is customary to exempt from the operation of mareva injunctions, moneys that will enable the party, against whom the orders are made, to pay ordinary living and business expenses, and to carry on a relevant business and to pay reasonable legal expenses in connection with at least the proceeding before the court.

There is, however, evidence before the Court in this matter which establishes to my satisfaction that Mr Ling has already paid substantial sums in legal costs, in the order of $170,000, after the $850,000 had been paid to the Public Trustee, and that such sum was therefore paid from other sources.

The evidence which the Court has as to Mr Ling's financial April 1992, from which it seems, though it is not really very position was filed in response to an order of Davies J of 23

clear, that the assets to which Mr Ling may have some entitlement are to be found in a large number of trusts in which he may have some form of interest, but it does not appear from that evidence that he has assets in his own name.

Nevertheless, he seems to have been able to find money sufficient to pay the substantial sums of legal costs to which

I have already referred.

I am not persuaded that M r Ling needs to have recourse to the $850,000, together with accrued interest, held by the Public Trustee, for the purpose of paying legal expenses of this rroceeding, or any other proceeding, or of paying his ordinary living expenses or any business expenses.

Indeed, it seems to me that the evidence tilts the other way and shows that he has been able to meet those costs without recourse to the $850,000. I therefore propose to make the orders sought by the Commonwealth with respect to the sum of $850,000, but I will return to their precise terms in a moment.

The first order sought in the motion of the Commonwealth is a mareva injunction which excludes ordinary living and business expenses and reasonable legal expenses from its operation, but that is an order which purports to restrain Mr Ling from dealing

with any of his assets, and as I read it, it is not intended to embrace within its scope order number 2, with respect to the sum	of $850,000 held by the Public Trustee.
That must be correct, otherwise there would be a necessary inconsistency between the two. No objection is taken by any party to the first order that is sought in the Commonwealth's notice of motion, subject to the modification that Mr Ling should be able to pay reasonable legal expenses incurred, not only in this proceeding, but in certain related proceedings, G225 of 1992, G656 and G657 of 1993, all instituted in this Court, or from any of the judgments in those proceedings; and subject to the further modification that legal expenses should be able to be paid relating to any other litigation to which Mr Ling is a party.
In my opinion it is not appropriate to make this last mentioned modification, but it is appropriate to make the modification mentioned with respect to the three named sets of proceedings, together with, of course, the present proceeding. In the result the court makes the following orders that:
1. Until further order either in this proceeding, G182 of 1992, or in any appeal therefrom, the first respondent be restrained from removing or causing or permitting to be removed from Australia any of his assets therein, or selling, charging or in any way dealing with or causing or

permitting any of those things to be done to any of his assets wherever situated, provided that this order shall not prevent:

(a)	the first respondent paying ordinary living and business expenses;
(b)	the first respondent paying reasonable legal expenses as incurred in this proceeding, proceedings G225 of 1992, G656 and G657 of 1993, or any appeal from any judgment in any of those proceedings; and
(c)	the first respondent satisfying any judgment in this proceeding or proceedings G225 of 1992, G656 and G657 of 1993;

2.    The first respondent forthwith upon being notified of this order direct the Office of the Public Trustee of the State of Queensland to continue to hold the sum of $850,000 and any interest which has accrued or will accrue thereon referred to in the affidavit of Julianne Vens sworn 7 April 1992 and filed in this proceeding, and to deal with that money only in accordance with either:

(a) any further order of this Court; or

(b) a written direction signed by both the

Commonwealth of Australia and Mr Ling or their

respective solicitors;

3.   These orders shall continue in force after entry of judgment in this proceeding and in proceedings G225 of 1992, G656 and G657 of 1993 in aid of execution;

4.   The cost of the motion dated 25 November 1993 of the

Commonwealth shall be paid by the first respondent, otherwise there shall be no order for costs of that motion;

5.   The notices of motion of the first respondent dated

26 November 1993, and of Alan Richard Taylor and

Trevor John Schmeimer as receivers and managers of Palm Springs Village Pty Limited dated 30 November 1993 be dismissed.

6.   The first respondent shall pay the costs of the

Commonwealth of Australia of the first respondent's motion and the receivers shall pay the costs of the Commonwealth of Australia, of the receivers' motion;

7.   Liberty to apply be reserved to any party on two days

notice.

preceding sixteen (16) iages are	I certify that this and the
a true copy of the reasons for judgment of the, Honourable Mr Justice Lockhart.1
Associate
Dated: 2 December 1993

Counsel for the Applicant : A Sullivan QC

F Kunc

Solicitors for the Applicant	Australian Government Solicitor
Counsel for First Respondent	J C Campbell QC
W Donald

Solicitore for First Respondent	:	MacPhillamy Donald & CO
Solicitors for Liquidators of
Palm Springs Village Pty Limited	A G Robinson Creais
Date of Hearing	1 December 1993
Date of Judgment	2 December 1993